17.4 Choosing an allocation method

Question 1

Which method of allocating joint costs should be used? When selling-price data exist at the splitoff, ________ is preferred, even if further processing is done.

Answer 1

the sales value at splitoff method

Question 2

4 reasons why When selling-price data exist at the splitoff, the sales value at split off method is preferred, even if further processing is done.

Answer 2

1.measure of benefits
2. independent of further processing decisions
3. common allocation basis
4. simplicity

Question 3

1. measure of benefits received
   The sales value at splitoff is the best measure of the benefits received by joint products relative to all other methods of allocating joint costs (such as the physical method) because a company incurs

Answer 3

joint costs to generate revenues at the split off point

Question 4

2. independent of further processing decisions
   The sales value at splitoff method does not require information on the

Answer 4

processing steps after splitoff.

Question 5

2. independent of further processing decisions
   the _____ and the ______-methods require information on (a) the specific sequence of further processing decisions, (b) the separable costs of further processing, and (c) the point at which individual

Answer 5

NRV and constant gross margin percentage NRV

Question 6

3. COMMON ALLOCATION BASIS.
   As with other market-based approaches, in the sales value at splitoff method, _______ is a convenient common basis for allocating joint costs. In contrast, the physical measure at splitoff method may lack an easily identifiable common basis for cost allocation

Answer 6

revenue

Question 7

3. COMMON ALLOCATION BASIS.
   the ________ at splitoff method may lack an easily identifiable common basis for cost allocation

Answer 7

physical measure

Question 8

When selling prices of all products at the splitoff point are unavailable, the ______ method is the best alternative.

Answer 8

NRV

Question 9

the _____ method is commonly used when selling prices at splitoff are not available as it provides a better measure of the benefits received than two other methods

Answer 9

NRV

Question 10

The________ method treats the joint products as though they are a single product.

Answer 10

constant gross-margin percentage NRV method

Question 11

it does not measure the benefits received by each joint product at the splitoff point.

Answer 11

constant gross-margin percentage NRV method

Question 12

Although there are difficulties in using the________ method—such as not reflecting benefits-received—there are instances when it may be preferred, such as when prices are volatile or the process after splitoff is long or uncertain, and a comparable physical measure for all products is available. This is the case, for instance

Answer 12

physical-measure method

Question 13

The ________ is also useful when joint cost allocations are used as the basis for setting market prices, as in rate regulation.

Answer 13

physical-measure method

Question 14

Rather than allocating joint costs, some companies, such as in the meatpacking, canning, and mining industries, simply?.

Answer 14

subtract joint costs from total revenues in their management accounts and value inventories at NRV.

Question 15

For companies such as in the meatpacking, canning, and mining industries, simply subtract joint costs from total revenues in their management accounts and value inventories at NRV.
Recording inventories at _____ recognizes income on products before they are sold. To deal with this problem, some companies record inventories at _____ minus an estimated operating income margin. When any end-of-period inventories are sold in the next period, the cost of goods sold equals this carrying value

Answer 15

NRV